Tobacco in Romania

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Executive Summary

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Traditional tobacco sales decrease in 2016

In 2016, traditional tobacco (dominated by cigarettes) witnessed a slight decrease in value sales in Romania. The new ban on smoking in public places and many restrictions on existing products, along with an increase in illicit trade, are the main factors responsible for this decrease. Nonetheless, there has been a delay in implementing EU regulations into the national legislative framework: deadline was May 2016, but law was not introduced until November 2016, with effective implementation starting at end of December 2016.

Diversification and development of vapour products

The ban on public smoking has redirected attention towards electronic cigarettes and their more convenient use under the current legal framework. The launches of IQOS (Philip Morris) and Kent Glo iFuse devices (British American Tobacco), along with their premium heated tobacco brands (Marlboro Heets and Kent Neopods) have made the market more dynamic and open to innovation and the latest international trends.

Market dominated by international companies

While there are signs that the tobacco market will gradually become more dynamic, the present landscape continues to be completely dominated by cigarettes. According to the Agency for Fiscal Administration, the market has a concentration rate of 25%, the highest in Romania, characterised by an average of 13% for the main fields of activity generating significant revenues. Existing major companies (from eight which registered a positive turnover) British American Tobacco Romania, Philip Morris Romania and JT International (Romania) have consolidated their position, without any significant changes in the last year. As an exception for the region, British American Tobacco remains the leader in Romania, accounting for almost half of sales, while it ranks only second and third in the rest of Eastern and Central Europe.

Main distribution channels – independent small grocers

Traditional distribution trends also remain unchanged, with independent small grocers continuing to lead sales. However, online sales are growing as hypermarkets and other retailers are increasingly promoting online shopping. Newsagent-tobacconists/kiosks, along with hotels/restaurants/bars are the next most popular distribution methods. As a distinct case, heat-not-burn products are present on the market through more dedicated channels: specific networks for IQOS (like IQOS on wheels and IQOS places), while the Kent Glo iFuse devices are sold in the Mega Image chain (with very broad coverage), in Inmedio stores and many gas stations (Petrom, OMV).

Forecasted decline of smoking prevalence and tobacco sales

The recent decline of tobacco sales will worsen over the forecast period. First of all, there is the issue of the implementation of the many changes imposed by the new EU Tobacco Directive regulations (eg ban on flavoured products, inclusion of more visible warning messages, etc.). The current ban on smoking is already generating a change in habits that will probably grow deeper with time. Secondly, there is the expected increase in e-cigarette sales (despite introduction of excise and other constraints) and other alternatives for smoking that will minimise the market share of traditional smoking. Even if resistance to change is high for smoking behaviour, it is clear that the structure of the market will change fundamentally in the next decade, especially in light of the innovation trends aimed towards heat-not-burn products and other similar technological developments.

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